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EEE Guest Speaker Series: Yong Li (SUNY Buffalo)
Start Date: 1/26/2018Start Time: 11:00 AM
End Date: 1/26/2018End Time: 12:30 PM
Event Description:

Title: When do venture capital firms retain equity shares after investee IPO?

Abstract: This study develops a real options framework on venture capital investors’ (VCs) exit strategy after investee ventures go public. IPO presents an opportunity for VCs to cash out and realize the value of their investments. Yet, many VCs choose to retain a significant ownership stake after venture IPO. Extant research suggests that VCs retain equity to signal the quality of investees. We offer the view that pre-IPO equity investment in a venture constitutes an option to divest equity post-IPO. We propose that the exit decision depends in part on the factors that determine the value of the exit option, including market uncertainty and the VC’s privileged knowledge about the value-creating potential of the venture’s assets. The empirical analysis provides supportive evidence for our argument.

Key words: venture capital, post-IPO cashout, uncertainty, asymmetric knowledge, real options

Location Information:
Syracuse University - Whitman School of Management  (View Map)
721 University Ave
Syracuse, NY 13244
Onondaga
Phone: (315) 443-3751
Room: Whitman 525

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